EU: Commission takes next steps on the path to simplifying Taxonomy Reporting

On 4 July, the European Commission adopted a delegated act aimed at simplifying the application of the EU Taxonomy and reducing the administrative burden for EU companies (the “Delegated Act”). 

It applies from 1 January 2026, and makes amendments to the: 

(1) Taxonomy Disclosures Delegated Act;

(2) Taxonomy Climate Delegated Act; and

(3) Taxonomy Environmental Delegated Act.

This publication is on schedule and follows on from the Commission’s public consultation on its draft legislation (published in February 2025 as part of the Commission’s first Sustainability Omnibus simplification package – see our earlier blog post here).   

We take you through the key simplification measures set out in the new rules below.

Key simplification measures

Materiality Thresholds

The provisions exempt non-financial and financial undertakings from assessing Taxonomy eligibility and alignment for economic activities that are not financially material for their business:

• For non-financial undertakings, activities are considered non-material if they account for less than 10% of total turnover, CapEx or OpEx – the Commission's FAQs clarify that assessment of materiality of economic activity should be made for each KPI independently (such that activity could be non-material for the turnover KPI but generate material CapEx). Undertakings will have to separately report in the reporting templates the proportion of turnover, CapEx, or OpEx that was not assessed as a result of being considered non-material. Non-financial companies also have the option not to assess taxonomy eligibility in alignment for their total OpEx if it is not material for their specific business model. In such cases, instead of reporting their OpEx KPI, such firms need only provide the total value of their OpEx and an explanation why it is not material. 
• For financial undertakings, activities will be deemed non-material where they account for less than 10% of loans and investments financing specific economic activities whose use of proceeds is known (such non-material assets must be reported separately as non-material exposures in the reporting templates). However, this flexibility does not apply to exposures for which the use of proceeds of the borrower or investee is not known (e.g. general purpose loans or investments in equity). 

Additionally, credit institutions that are subject to several KPIs (e.g. GAR on stock and flow, financial guarantees, assets. der management, fees and commissions KPIs) have the option not to report those KPIs that capture financial activities and assets that are not material for their business. In particular, if the financial activities and assets captured by a given KPI generate less than 10% of the credit institution’s net turnover, it may decide not to report that KPI. 

KPI reporting by financial companies

A number of key changes have been made:

• Until the end of December 2027, financial undertakings will have the option to opt out of reporting detailed taxonomy KPIs, provided that they do not claim that their activities are associated with taxonomy aligned activities, and provided they publish a statement to that effect in their management reports.
• Pending a more comprehensive review of the Taxonomy criteria and disclosure rules, the application of the Trading Book KPI is postponed by two more years until 1 January 2028.
• KPIs for financial undertakings have been simplified in several ways. Particularly, the revised rules exclude from scope of KPI reporting, derivatives, cash and cash equivalents, on-demand interbank loans, and other categories of assets, such as goodwill and commodities. Also excluded from the scope of KPI reporting is exposures to undertakings that are not subject to mandatory sustainability reporting at individual or consolidated level and exposures to undertakings whose parent is not subject to mandatory sustainability reporting (these exposures may be included in certain circumstances, e.g. where the company voluntarily reports the Taxonomy KPIs).
• With a view to ensuring that the KPIs of financial undertakings capture not only direct but also indirect exposures to entities subject to mandatory sustainability reporting, the revised rules clarify that exposures to SPVs that finance undertakings subject to mandatory sustainability reporting, or their assets, should be included in the denominator of financial undertakings’ KPIs.

Adjusting Reporting Templates and Cutting Data Points

• Taxonomy reporting templates have been streamlined by cutting the number of reported data points by 64% for non-financial companies and by 89% for financial companies.
• Further, the templates have been adjusted to provide transparency on the proportion in the denominator of the KPIs of the activities or exposures that are not assessed for taxonomy eligibility and alignment. 
• For non-financial companies one data point per KPI was added for activities considered as non-material. 
• For financial undertakings, templates have been adjusted to reflect the adjusted scope of financial KPIs.
• The Commission has deleted the entirety of Annex XII and the separate templates on the performance and exposures to the fossil gas and nuclear activities. Non-financial undertakings will report on these activities (if material) only in the ‘per activity’ template in the same way as for any other material activities. Financial undertakings will report on these activities, where material, in an aggregated form in their standard template.

DNSH criteria

The generic criteria for do no significant harm ("DNSH") to pollution prevention and control regarding the use and presence of chemicals has been simplified to reduce administrative burdens on reporting entities. 

The amendments specify the application of exemptions relating to the use of certain hazardous substances in electrical/electronic equipment and the use of authorised substances that deplete the ozone layer. The Commission has also removed the existing requirement that reporting undertakings assess the use and presence of substances that have been self-classified according to the Classification, Labelling and Packaging Regulation.

Moreover, the Commission has also launched a further review of existing Taxonomy screening criteria. This will include the DNSH criteria – the objective being updating, simplification and enhancing usability.

Next steps

The Delegated Act will now be transmitted to the European Parliament the Council for review. There is a 4-month scrutiny period (this can be further extended for 2 months), after which it will be published in the OJEU, entering into force 20 days after publication. 

The measures laid out in the Delegated Act will apply from 1 January 2026, for the 2025 financial period. However, undertakings have the option to defer for one year. 

Links to resources:

• Delegated Act
• Annexes to the Delegated Act
• Commissions FAQs
• Commission press release
• Linklaters: EU Omnibus Tracker: simplification of sustainability rules